SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2002
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission File No. 0-30420
LCS GOLF, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 11-3200338
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Tennis Court Road
Mahopac, New York 10541 77067
(Address of Principal Executive Offices) (Zip Code)
845-621-3945
Issuer's telephone number
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
---
Applicable only to corporate issuers:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 43,120,176 shares of Common Stock,
par value $0.001 as of October 31, 2002
Transition small business disclosure format (check one) Yes No X
------ ---
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LCS GOLF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
August 31, 2002 February 28, 2002
------------ -----------------
(Unudited)
ASSETS
Current assets:
Accounts receivable, net of allowance for doubtful accounts of $144,406 $ 0 $ 496
at February 28, 2002
Fixed assets, net 34,827 41,744
Deferred financing costs, net 0 26,110
Security deposits and other assets 0 9,293
--------------- ---------------
$ 34,827 $ 77,643
=============== ===============
LIABILITIES
Current liabilities:
Cash overdraft $ 22,090 $ 15,122
Accounts payable 618,135 673,816
Accrued Expenses 2,486,151 2,368,475
Liabilities to be paid with Common Stock 480,750 304,000
Debt in default 262,500 272,500
Debt not in compliance with terms 301,445 476,745
Notes payable 100,000 25,000
Loans from stockholder/president 905,480 889,553
Other current liabilities 54,925 51,925
--------------- ---------------
Total current liabilities 5,231,476 5,077,136
--------------- ---------------
CAPITAL DEFICIT
Common stock - $.001 par value, 50,000,000 shares authorized; 43,120,176 and
27,407,225 shares issued and outstanding, respectively ; 6,810,000 and
9,750,000 shares issuable, respectively 43,120,000 27,407
Additional paid-in capital 14,897,781 14,266,494
Accumulated deficit (20,137,550) (19,293,394)
--------------- ---------------
Total capital deficit (5,196,649) (4,999,493)
--------------- ---------------
$ 34,827 $ 77,643
=============== ===============
See notes to consolidated financial statements
LCS GOLF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, SIX MONTHS ENDED AUGUST 31,
----------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
NET REVENUES $ 11,543 $ 109,851 $ 31,908 $ 199,530
COST OF REVENUES -- 25,808 -- 66,306
------------ ------------ ------------ ------------
11,543 84,043 31,908 133,224
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(INCLUDES $37,000, $0, $57,000 AND $0,
respectively OF EXPENSES PAID WITH
COMMON STOCK) 123,355 466,465 271,298 2,143,444
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (111,812) (382,422) (239,390) (2,010,220)
Interest expense (530,516) (57,323) (604,766) (390,800)
------------ ------------ ------------ ------------
NET LOSS $ (642,328) $ (439,745) $ (844,156) $ (2,401,020)
============ ============ ============ ============
NET LOSS PER SHARE - BASIC AND DILUTED $ (.01) $ (.02) $ (.02) $ (.10)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 45,709,320 26,265,263 41,044,626 23,163,611
============ ============ ============ ============
See notes to consolidated financial statements.
LCS GOLF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED AUGUST 31,
----------------------------
2002 2001
----------- -----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(844,156) $(2,401,020)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 6,917 33,288
Issuance of common stock for services - net 57,000 1,398,399
Financing Charge - Non Cash 483,460 239,000
Changes in:
Accounts receivable 496 45,632
Prepaid and other current assets -- 9,478
Security deposits and other assets 9,293 25,494
Accounts payable and accrued expenses 196,096 515,362
Other current liabilities 2,999 47,925
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (87,895) (86,442)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets -- (13,610)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Overdraft 6,968 --
Proceeds from note issued 75,000 133,250
Repayment of note (10,000) (40,000)
Proceeds from major stockholder/president loans 15,927 125,989
Repayment of major stockholder/president loans -- (92,338)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 87,895 126,901
----------- -----------
NET INCREASE (DECREASE) IN CASH 0 26,849
CASH - BEGINNING OF PERIOD 0 1,514
----------- -----------
CASH - END OF PERIOD $ 0 $ 28,367
=========== ===========
NONCASH ACTIVITY:
Liabilities paid with common stock $ 390,000 $ 1,287,250
See notes to consolidated financial statements.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] The Company:
On October 28, 1997, LCS Golf, Inc. (the "Company"), an inactive New
York corporation, was merged in a reverse merger transaction into an
inactive Delaware corporation with the same name ("LCS Delaware") in
exchange for 980,904 shares of LCS Delaware's common stock. The Company
paid $50,000 as a finder's fee in connection with the merger which was
charged to expense. In addition, 3,916,360 shares with a value of
$25,000 were issued to certain existing shareholders of the Company for
services rendered in connection with the merger. For financial
accounting purposes, the merger on October 28, 1997 has been treated as
the acquisition of LCS Delaware by the Company in the form of a
recapitalization. Therefore, no value has been ascribed to the common
stock held by the LCS Delaware shareholders.
The Company was formed under the laws of the State of New York on March
8, 1994. On October 26, 1994, the Company commenced business operations
with the purchase of substantially all of the assets and the assumption
of specific liabilities of Bert Dargie Golf, Inc., a Tennessee
corporation engaged in the business of designing, assembling and
marketing golf clubs and related accessories.
In August 1996, the Company conveyed, assigned, transferred and
delivered substantially all of its business assets to Dargie Golf Co.
(the "Purchaser") in exchange for the: i) cancellation of the remaining
debt owed to the Purchaser arising from the October 26, 1994 purchase,
ii) sale by Herbert A. Dargie III of his 5 percent ownership interest
in the Company to the Company and, iii) the assumption of certain
liabilities of the Company by the Purchaser.
The Company was engaged in the acquisition and operation of companies
which provide products and services to the golf playing public and
marketing the database information obtained from its websites. These
products and services included discounted green fees and other
services, and a golf website (http://www.golfuniverse.com) which
provides various golf-related hyperlinks to other golf websites and
golf course previews. Since March 1, 2001, the Company has had limited
operations.
The Company formerly designed and manufactured consumer products, but
ceased its manufacturing operations in November of 1999. These products
consisted of specialty pillows which LCS Golf planned to sell on its
websites. LCS Golf had outsourced its manufacturing operations to
produce the Company's line of products utilizing its machinery and
equipment. Since March 1, 2000, the manufacturing segment was idle due
to the Company's decision not to allocate funds to this segment and to
concentrate all of its resources in its database and Internet marketing
business. If the Company is able to raise additional capital, it
intends to resume its manufacturing operations.
[2] Principles of consolidation:
The consolidated financial statements include the accounts of LCS Golf,
Inc. and its subsidiaries: Play Golf Now, Inc.; Golfpromo, Inc.; Golf
Universe, Inc.; Ifusion Corp. and Mr. B III, Inc. (inactive), all of
which are wholly owned. All material intercompany accounts and
transactions have been eliminated in consolidation.
[3] Basis of presentation:
The accompanying financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
[3] Basis of presentation: (continued)
Through August 31, 2002, the Company has not been able to generate
significant revenues from its operations to cover its costs and
operating expenses and has incurred significant recurring losses. In
addition, the Company has a significant working capital deficiency and
a capital deficit. Although the Company has been able to issue its
common stock for a significant portion of its expenses and has had to
rely on loans from its major stockholder/president and others, it is
not known whether the Company will be able to continue this practice.
It is also not known if the Company will be able to meet its operating
expense requirements.
These circumstances raise substantial doubt about the Company's ability
to continue as a going concern. If the Company is not able to raise
sufficient additional capital or debt financing, the Company will be
forced to cease operations. In addition, the Company is investigating
potential merger candidates that have or may be able to generate
additional capital or obtain debt financing. No assurances can be given
to the success of these plans. The financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
Certain accounts have been reclassified for comparative purposes.
[4] Interim Financial Data
Those condensed consolidated financial statements have been prepared by
the Company, without audit by independent public accountants, pursuant
to the rules and regulations of the United States Securites and
Exchange Commission. In the opinion of management, the accompanying
condensed consolidated financial statements include all normal
recurring adjustments necessary for the information presented not to be
misleading. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted from these statements pursuant to such rules and
regulations and, accordingly, these condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements included in the Company's fiscal year 2001 Annual
Report on Form 10-KSB. Operating results for the three and six months
ended August 31, 2002 and 2001 are not necessarily indicative of the
results that may be expected for the full year or any other period.
There have been no significant changes in the accounting policies of
the Company. There were no significant changes in the Company's
commitments and contingencies as previously described in the fiscal
year 2002 Annual Report on Form 10-KSB.
[5] Depreciation of equipment:
Depreciation is provided utilizing the straight-line method over the
estimated useful lives of the related assets. For income tax purposes,
accelerated depreciation methods are utilized for certain assets.
[6] Deferred income taxes:
Deferred income taxes are reported using the asset and liability
method. Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
[7] Loss per share:
Loss per share has been computed by dividing the net loss by the
weighted average number of common shares outstanding, including shares
with respect to liabilities to be paid with common stock, during each
period. The effect of outstanding potential common shares, including
stock options, warrants and convertible debt is not included in the per
share calculations as it would be anti-dilutive.
[8] Use of estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, which are subject to impairment considerations,
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE B - DEBT IN DEFAULT
On February 16, 2000, the Company borrowed from Traffix, Inc. (formerly Quintel
Communications, Inc.) ("Traffix"), an internet marketing and development
company, $500,000 in the form of a convertible promissory note ("Note"). The
Note was due on demand at any time after August 16, 2000 and is convertible into
500,000 shares of common stock of the Company at any time prior to repayment.
Any shares issued by the Company will have registration and piggyback
registration rights and are subject to anti-dilution adjustments in certain
cases. If any additional shares are issued under the anti-dilution provisions,
the Company will have a one-time repurchase right at a $1.00 per share during
the twelve-month period following the date of conversion of the Note. The Note
was without interest until the earlier of August 17, 2000 or an event of default
under the Note. Interest is being charged at prime plus 4%, not to exceed 14%.
The Note may be prepaid at anytime after giving 15 days prior written notice.
The Note is collateralized by the Company's database and all related records,
contract rights and intangibles which has been delivered to the lender and must
be updated upon request, until the obligation has been paid.
The Company entered into a ten-year licensing agreement with Traffix for the use
of its database for a monthly payment of $5,000 which can be used to offset the
remaining balance owed to Traffix. During the quarter and six months ended
August 31, 2002, no such payments were made.
On the same date, the Company also entered into a two-year marketing agreement
with Traffix to develop programs to market products and services and send
promotional e-mails to the visitors and customers of the Company's websites.
Traffix is to pay the Company $.25 for each individual who "opts in" to be
registered with Traffix at its site. Revenues generated from these programs
(less direct "out-of-pocket" costs, including royalties, cost of producing the
marketing materials and other expense directly related to the programs) is to be
divided equally and distributed quarterly less any required reserves. There have
been no revenues recognized from these programs.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE B - DEBT IN DEFAULT (CONTINUED)
In connection with the marketing agreement, the Company issued two-year options
to purchase 100,000 shares of the Company's common stock at $1.00 a share and
100,000 shares at $2.00 per share. The value of these options at grant date,
utilizing the Black-Scholes option-pricing model, was $139,000. The assumptions
used in determining the value was an expected volatility of 155%, an average
interest rate of 6.68% per annum and an expected holding period of two years.
The estimated value of these options was expensed in the year ended February 28,
2001. These options are subject to certain anti-dilution provisions and provide
registration rights for the underlying shares. The agreement can be terminated
in the event of a default under the agreement by either party which is not
corrected within 30 days after notice is given.
On August 8, 2000, following certain disagreements concerning Traffix's use of
the Company's database, the Company entered into a Forbearance Agreement and
amended the security agreement with Traffix. The Company made a $50,000 payment
against the $500,000 convertible note which was funded personally by its major
stockholder/president. The Note was amended to provide for payment on demand.
The amended security agreement requires the Company to remit to Traffix, 50% of
collections on the outstanding accounts receivable as of August 10, 2000 and 25%
of all subsequent accounts receivable collected, within five days. Payments are
to be credited, first to interest and then to principal. Traffix is also to
receive 50% of all other cash receipts, including additional loans, until the
Note is paid. The amended security agreement also includes all accounts of the
Company and all security, or guarantees held with respect to the accounts and
all account proceeds. In addition, the Company's major stockholder/president
personally guaranteed up to $250,000 of the Note of which $160,000, (including
the two payments of $50,000 each discussed below) has been paid against this
guaranty.
Due to the above amendment, Traffix agreed not to demand payment on the Note or
commence any action against the Company, as long as it receives payments for
interest and principal of at least $10,000 per month or collection of the
Company's accounts receivable or money from the guarantor, the Company's major
stockholder/president, and the Company generates gross revenues of at least
$75,000 per month.
On August 8, 2000, the Company received $300,000 from American Warrant Partners,
LLC ("AWP") evidenced by an 8% convertible subordinated promissory note (see
below). The Company did not remit 50% of the cash proceeds of this note, as
required by the Forbearance Agreement, which put the Company into default under
its agreement with Traffix. The Company has not obtained a waiver of the
default, however, the major stockholder/president personally made two payments
of $50,000 each towards the principal and interest on the Traffix Note. The
Company recorded these payments as a loan from its stockholder/president. In
addition, the Company agreed to remit 50% (formerly 25%) of cash received from
new accounts receivable.
On May 16, 2001, the Company entered into an agreement Traffix, Inc. which
amended the aforementioned Forbearance Agreement dated August 8, 2000. The
Company agreed to pay $10,000 on signing. Upon the closing of the AWP financing
(see Note G), Traffix was to be paid an additional $10,000. Commencing on June
1, 2001, the Company agreed to a payment schedule of a minimum of $10,000 per
month. Since May 16, 2001 the Company has not made all of the required $10,000
monthly payments to Traffix, as called for by the amended Forebearance
Agreement. As a result, as of August 31, 2002, the Company is in default of
its amended Forbearance Agreement with Traffix.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE C - DEBT NOT IN COMPLIANCE WITH TERMS
[1] On August 8, 2000, AWP loaned the Company $300,000 evidenced by 8%
convertible subordinated promissory note with a maturity date of August
8, 2002. The note is convertible, at the option of AWP, into common
stock at $.25 per share (market price of $.4375 per share), subject to
adjustment which resulted in a discount of the note of approximately
$201,000. This discount was immediately recognized as interest expense
due to the ability of AWP to convert the note at any time. Interest is
payable quarterly commencing on September 30, 2000. The Company also
issued a five-year warrant expiring on August 8, 2005 to purchase
600,000 shares of common stock, exercisable at $.40 per share, subject
to adjustment, to be exercised in whole or in part. The value of this
warrant at grant date, utilizing the Black-Scholes option-pricing
model, was approximately $260,000. The assumptions used in determining
the value was an expected volatility of 227%, an average interest rate
of 6.06% per annum and an expected holding period of five years. The
allocated value of the warrant is $99,000. This amount is to be
amortized over the life of the two-year note, or shorter if exercised
earlier. Based upon the values ascribed to the convertibility feature
of the note and the warrant, the Company has recorded additional
interest expense of approximately $228,000 during the year ended
February 28, 2001. The Company also entered into a registration rights
agreement whereby a Registration Statement for the shares is to be
filed as soon as reasonably practicable but not later than September
15, 2000. The Company did not file the Registration Statement by
September 15, 2000 and since a Registration Statement was not declared
effective by November 15, 2000, the terms of the agreement are that for
each 30-day period that the Registration Statement is not declared
effective, the conversion price of $0.25 of the convertible note and
the warrant exercise price of $0.40 will each be reduced by 2% per
30-day period, until the exercise price reaches $0.05. Pursuant to this
provision, at Feburary 28, 2002, the reduced conversion price and the
exercise prices were each $0.04 respectively. In addition, the interest
rate on the convertible note will increase 2% for each 30-day period,
not to exceed 15%. Pursuant to this provision, the Company has recorded
interest expense of $2,000 and $8,000 for the three and six momths
ended August 31, 2002, respectively. As of August 31, 2002, the
interest rate was 15%. Certain officers and directors agreed to a
lock-up agreement restricting their right to sell, transfer, pledge or
hypothecate or otherwise encumber their shares until the earlier of 1)
the one year anniversary of the agreement, 2) the effective date of the
Registration Statement or 3) until the Company raises $1,000,000 in
equity or debt financing. The Company agreed to recommend and use its
best efforts to elect a representative of AWP to the Board of Directors
until one year from the date of the agreement or until the Company
raises $1,000,000 in equity or debt financing.
On May 16, 2001, the Company entered into an amendment, waiver and
consent relating to the 8% convertible subordinated promissory note,
warrant, and registration rights agreement revising the conversion
price of the promissory note and the exercise price of the warrant to
the lower of $0.12 or 80% of the current market price on the date
immediately preceding the date of the exercise or conversion. The
Company is required to register the underlying common stock in a
registration statement to be filed in connection with a proposed new
investment no later than 60 days from June 15, 2001, in consideration
for which, AWP has agreed to waive any penalty provisions with respect
to the filing of the registration statement and consent to the issuance
of common stock below the then applicable conversion or exercise price
of the promissory note and warrant relating to the financing received
on May 24, 2001.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE C - DEBT NOT IN COMPLIANCE WITH TERMS (CONTINUED)
[1] (continued)
Pursuant to this amendment of the Conversion and Exercise price, the
Company recorded a charge of approximately $239,000 during the quarter
ended May 31, 2001, which represents the beneficial conversion feature
resulting from the difference between the fair market value of the
shares at the effective date of the amendment and the effective
conversion rate of the note.
[2] On May 24, 2001, the Company entered into an agreement with Private
Capital Group, LLC ("PCG") (an entity related to AWP) for the sale of
$200,000 of 8% convertible debentures with Private Capital Group, LLC
("PCG") ( an entity related to American Warrant Partners) which can be
converted at any time by the holder or will automatically convert into
common stock in five years, at the lower of $0.12 per share or 80% of
the market price as defined. The $200,000 Note has been personally
guaranteed by the Company's major stockholder/president with 750,000 of
his shares of the Company's stock being held in escrow. The Company
also agreed to file a registration statement for the shares but no
later than sixty calendar days from June 15, 2001. The Company did not
file the registration statement within the sixty-day period. The
lenders waived this noncompliance. At February 28, 2002, the Company
had received $175,000 of proceeds from this note. The Company has
recorded a charge of $175,000 for the year ended February 28, 2002. The
charge represents the beneficial conversion feature resulting from the
differences between the fair market value of the shares at the date of
issuance of the debt and the effective conversion rate for the
convertible debentures.
On January 31, 2002, the Company was notified that it was in default of its
convertible debentures agreements with Private Capital Group, LLC ("PCG") and
its 8% convertible subordinated promissory note to American Warrant.
As of January 31, 2002 the Company had not filed its quarterly report on Form
10-QSB for the period ending November 30, 2001 within the time required pursuant
to Rule 13a-13 of the Securities Exchange Act of 1934. PCG considered this to be
an event of default as defined in the debenture agreement and demanded that the
Company cure this default within thirty business days in accordance with the
debenture agreement. The Company believed that it cured this default with the
filing of this Form 10-QSB for the period ending November 30, 2001 on February
11, 2002.
The Company has not paid the interest due on the promissory note, which American
Warrant considers this to be an event of default under the note. This default
was not cured within twenty calendar days therefore, the principal and accrued
interest are payable immediately.
On June 28, 2002, the Company entered into an Agreement and Release with AWP and
PCG, the holders of the Company's 8% convertible promissory notes.
The Agreement and Release addresses the Company's noncompliance with the terms
of the 8% convertible promissory notes.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE C - DEBT NOT IN COMPLIANCE WITH TERMS (CONTINUED)
Pursuant to the Agreement and Release, AWP and PCG in the aggregate converted
$200,000 of the 8% convertible promissory notes at a price of $0.04 per share,
as adjusted, for an aggregate of 5,000,000 shares of the Company's common stock.
Should the price of the Company's stock not reach and remain at $0.50 per share
for a minimum period of thirty trading days within 120 days of a merger with an
operating company, at an average volume of 150,000 shares per day, then the
Company will issue a total of an additional 6,000,000 shares of its common stock
to AWP and PCG. Since a merger with an operating company did not occur within
thirty days of the aforementioned agreement and release, AWP and PCG have the
option to receive immediate repayment of their notes or to receive the
additional 6,000,000 shares of common stock. At July 28, 2002, we recorded an
accrual for $420,000 related to these shares.
Also pursuant to the Agreement and Release described above, AWP exercised the
warrants that were issued in conjunction with the 8% convertible promissory
notes. These warrants were exercised on a cashless basis into 512,951 shares of
the Company's common stock.
On June 5, 2002, the Company issued the 5,000,000 shares common stock in
conjunction with the conversion of the $200,000 of 8% convertible promissory
notes and issuance of the 512,951 shares in conjunction with the exercise of the
warrant by AWP. The 800,000 shares that have been held in escrow as security for
the promissory notes were released and returned to the Company's president and
chief executive officer.
LCS GOLF, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
August 31, 2002
NOTE D - Bridge Note
On May 28, 2002, the Company entered into a loan agreement with a third
party for $75,000. In conjunction with this loan the Company also
granted the third party 200,000 shares of the Company's common stock.
The Company's president, chief executive officer and principal
stockholder has personally pledge 2,000,000 shares of the Company's
common stock as collateral for the loan. The Company defaulted on the
aforementioned loan when it was not able to make the required repayment
of $75,000 on June 11, 2002. Pursuant to the loan agreement, the
Company is required to issue 10,000 shares of the Company's Common
Stock ("Penalty Shares") to the third party for each day the loan is
past due. As of August 31, 2002, the Company is obligated to issue
810,000 shares of its common stock and for the three and six months
ended August 31, 2002, the Company has recorded $60,750 in interest
expensve related to the account of these penalty shares.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
We are a holding company that until December 31, 2001 operated as a
provider of outsourcing of permission e-mail marketing technologies and
services. We provided permission email direct marketing services through
Golfpromo.net and Targetmails.com., Internet and direct marketing services
through Ifusionco.com. and PlayGolfNow.com, Golf ecommerce news and information
through a vertical golf portal and discounts on golf services.
We have terminated almost all of our operations and released all but two of our
employees, our two executive officers, neither of whom is drawing a salary. We
currently operate our email marketing business at very limited levels, which
generates no material revenues. We are investigating the possibility of
acquiring or otherwise affiliating with a business that could benefit from the
use of our databases and technology but currently have not identified any such
business. Any such acquisition or affiliation will also most likely require
significant financing. We currently have no commitments for any financing and
may be unable to raise needed cash on terms acceptable to us if at all. If we
are unable to resume our operations and/or obtain a revenue generating business
partner and the financing required to support these activities by December 2002,
we will most likely cease all operations.
Results of Operations
Three Months Ended August 31, 2002, Compared to Three Months Ended August 31,
2001
Revenues
Our revenues for the three months ended August 31, 2002 were $11,543 on
a consolidated basis as compared to $108,851 for the three months ended
August 31, 2001. This decrease resulted primarily from our substantial reduction
in operations.
Cost of Revenue
Cost of revenues was $0 for the three months ended August
31, 2002 as compared to $25,808 for the prior three months ended August
31, 2001. This decrease resulted primarily from our substantial reduction in
operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $123,355 for the
three months ended August 31, 2002 compared to $466,465 for the three months
ended August 31, 2001. This decrease resulted primarily from our substantial
reduction in operations.
Interest Expense
Interest expense consists of interest on debt obligations and common
stock issued or issuable in connection with debt obligations. Interest expense
was $530,516 for the three months ending August 31, 2002 compared to $57,323 for
the three months ending August 31, 2001.
Income Taxes
No provision for federal or state income taxes was recorded as we have
incurred net operating losses since inception through August 31, 2002. The tax
benefit of the net operating losses has been reduced by a 100% valuation
allowance.
Six Months Ended August 31, 2002, Compared to Six Months Ended August 31, 2001
Revenues
Our revenues for the six months ended August 31, 2002 were $31,908 on a
consolidated basis as compared to $199,530 for the six months ended
August 31, 2001. This decrease resulted primarily from our substantial reduction
in operations.
Cost of Revenue
Cost of revenues was $0 for the six months ended August
31, 2002 as compared to $66,306 for the six months ended August 31,
2001. This decrease resulted primarily from our substantial reduction in
operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $271,298 for
six months ended August 31, 2002 compared to $2,143,444 for the six months
ended August 31, 2001. This decrease resulted primarily from our substantial
reduction in operations.
Interest Expense
Interest expense consists of interest on debt obligations and common
stock issued or issuable in connection with debt obligations. Interest expense
was $604,766 for the six months ending August 31, 2002 compared to $390,800 for
the six months ending August 31, 2001.
Income Taxes
No provision for federal or state income taxes was recorded as we have
incurred net operating losses since inception through August 31, 20022. The tax
benefit of the net operating losses has been reduced by a 100% valuation
allowance.
Liquidity and Capital Resources
Cash Balance, Working Capital and Cash Flows from Operating Activities
We had negative cash flow from operations of $(87,895) during the six
month period ended August 31, 2002 due to very limited operations and we
continue to be in a cash overdraft position.
Over the 24 month period ending March 31, 2002, we continuously reduced
our operations so that as of that date we had suspended almost all of our
revenue generating operations because the income generated by our business was
not sufficient to sustain these operations. In order to resume and maintain
operations for at least one year thereafter, we estimate that, exclusive of
currently outstanding debt, we will require financing approximating $100,000,
although we cannot assure that we will not require more financing for this
purpose. We are investigating the possibility of acquiring or otherwise
affiliating with a business that could benefit from the use of our databases and
technology but currently have not identified any such business. Any such
acquisition or affiliation will also most likely require significant financing.
We currently have no commitments for any financing and may be unable to raise
needed cash on terms acceptable to us if at all. Financings may be on terms that
are dilutive or potentially dilutive to our stockholders. Further, our weak
financial condition could restrict our ability to acquire or affiliate with a
business partner as well as prevent us from establishing a source of financing.
If we are unable to resume our operations and/or obtain a revenue generating
business partner and the financing required to support these activities by
December 31, 2002, we will most likely cease all operations.
On May 28, 2002 we entered into a loan agreement with an unaffiliated
party pursuant to which we borrowed $75,000. The loan bears no interest and was
repayable by June 11, 2002. We issued 200,000 shares of our common stock to the
lender. The loan remains outstanding as of the date of this filing. We are
obligated to issue 10,000 shares of our common stock to the lender for each day
that the loan remains unpaid. As of November 10, 2002, we are obligated to issue
an additional 1,520,000 shares of our common stock.
On June 28, 2002, we entered into an Agreement and Release with certain
debtholders. In connection with the Agreement and Release, at July 28, 2002,
since we did not complete a merger with an operating company within thirty days,
we became obligated to issue 6,000,000 shares of our common stock.
We continue to have a significant working capital deficiency and to
generate substantial operating losses.
Issues and Uncertainties
Forward Looking Statements
Certain statements in this Report, and any documents incorporated by
reference herein, constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934 and the Private Litigation Reform Act of 1995. These
forward-looking statements include, among others, words such as "expects,"
"anticipates," "intends," "believes" and other similar language. Our actual
results could differ materially from those discussed herein. You should not
place undue reliance on these forward-looking statements, which apply only as of
the date of this Report. Factors that could cause or contribute to such
differences include, but are no limited to, the risks discussed in the risk
factors set forth below, which are not meant to be all inclusive.
Risks Associated with our Company
We currently have significantly limited operations and generate no
material revenue. When we were operational we operated in a rapidly changing
environment that involved a number of risks, some of which are beyond our
control. The following discussion highlights the most material of the risks we
currently face and those we will be subject to if we resume our operations.
WE ARE IN DEFAULT OF A SENIOR SECURED LOAN, WHICH MAY PREVENT US FROM RESUMING
OPERATIONS.
Our failure to remit 50% of the cash proceeds from the AWP transaction
to Traffix resulted in one of a number of defaults under the forbearance
agreement with Traffix. If Traffix elects to pursue its remedies under the
forbearance agreement and we are unable to reach a resolution with Traffix
acceptable to us, we may be unable to resume operations because Traffix's
actions may prevent us from obtaining needed financing. Even if we do reach an
amicable resolution with Traffix, which we have no reason to believe such
resolution is possible, and resume operations, our efforts to satisfy continuing
obligations under the Traffix agreements will significantly adversely impact any
cash flow we may generate in the future because we must remit 50% from new
accounts receivable until Traffix is paid in full. See also Notes B through D to
our unaudited consolidated financial statements for the three month period
ending August 31, 2002 for information relating to additional defaults by us on
our outstanding indebtedness.
OUR FINANCIAL CONDITION IS EXTREMELY WEAK AND WE MAY BE UNABLE TO CONTINUE AS A
GOING CONCERN.
Our operations have been dependent upon short-term borrowing and other
funding resources. From March 1, 1999 through August 31, 2002, our president
made net advances of approximately $905,480. Our independent auditors report on
our consolidated financial statements for the year ended February 28, 2002 and
the notes to our unaudited financial statements for the six months ended August
31, 2002 include language reflecting that substantial doubt exists as to our
ability to continue as a going concern. Our August 31, 2002 unaudited financial
statements show an accumulated deficit of approximately $(19,657,000). We expect
to continue to incur net losses and negative cash flow for the foreseeable
future and, unless we are able to resume operations and/or acquire or affiliate
with a business that generates revenue and obtain financing necessary to support
these activities by December 2002, we will most likely be forced to cease all
operations. In addition, any cash flow which we may generate will be
significantly reduced because we must remit 50% of all accounts receivable we
may collect to Traffix. Accordingly, any purchaser of our securities should be
prepared to lose his entire investment.
IF WE RESUME OUR BUSINESS, OUR SUCCESS WILL DEPEND, IN PART, UPON BROAD MARKET
ACCEPTANCE OF PERMISSION EMAIL MARKETING SERVICES.
The marketing of our products and services, even when active, has never
generated significant revenue and has resulted in our incurring substantial
losses and negative cash flow. Accordingly, in the event that we resume business
operations and use the Internet to market our services, we cannot assure you
that our business will ever be commercially viable. In any event, the growth of
the Internet is fairly recent and advertising on the Internet even more so. The
Internet may not be accepted as a viable long-term commercial marketplace and
medium of commerce for a number of reasons, including potentially inadequate
development of necessary Internet infrastructure, government regulation or
delayed development of enabling technologies and performance improvements. The
market for permission email marketing services is in its infancy, and we are not
certain whether our target customers will widely adopt and deploy this
technology. Permission email is email in response to an inquiry from a proposed
customer who has requested information relating to products or services. Even if
our target customers do so, they may not choose our services for technical,
cost, support or other reasons. Adoption of permission email marketing services,
particularly by those entities that have historically relied upon traditional
means of direct marketing, such as telemarketing and direct mail, requires the
broad acceptance of a new and substantially different approach to direct
marketing. We believe that the promotion of the concept of permission email
marketing will require us to engage in an intensive marketing and sales effort
to educate prospective customers regarding the uses and benefits of our products
and services. Enterprises that have already invested substantial resources in
other advertising methods may be reluctant or slow to adopt our approach.
Any future growth we may have will also depend on the commercial
success of our Golf Promo l Network, Targetmails and Ifusionc that comprise our
network. If our customers do not adopt and utilize our services at a rate
significantly greater than they have in the past, our business will not succeed.
Furthermore, the Internet advertising and permission email services market is
characterized by rapid technological change, frequent new product introductions,
changes in customer requirements and evolving industry standards. If we resume
our operations and we are unable to develop and introduce products or
enhancements to our service offering in a timely manner, if at all, we may not
be able to successfully compete.
COMPETITION IN THE MARKET FOR INTERNET ADVERTISING AND DIRECT MARKETING IS
INTENSE AND, IF WE RESUME OPERATIONS, COULD ADVERSELY AFFECT OUR BUSINESS.
If we resume our business, many of our current and potential
competitors, such as 24/7 Media, Inc., Postmaster Direct, Inc., Exactis, Inc.,
DoubleClick, Inc. and YesMail, Inc., have greater name recognition, longer
operating histories, larger customer bases and significantly greater financial,
technical, marketing, public relations, sales, distribution and other resources
than we will. Some of our potential competitors are large and well-capitalized
companies. In addition, some of our competitors may include website owners who
own permission email lists. If we resume our operations, we expect that we will
face competition from these and other competitors, including Internet portals,
traditional list brokers, banner advertising managers, independent list
managers, incentive-based subscriber lists and customer management and retention
service companies.
IF WE RESUME OPERATIONS, OUR FAILURE TO DEVELOP AND MAINTAIN OUR SALES,
MARKETING AND SUPPORT ORGANIZATION AND RELATIONSHIPS WITH OUR PRIOR NETWORK
PARTNERS AND THIRD PARTY LIST MANAGERS WOULD LIMIT OUR BUSINESS.
If we resume our business and we fail to substantially develop our
direct and indirect sales and marketing operations and our relations with our
prior network of independent product and service providers, our growth, if any,
will be limited. The products and services we would offer will require a sales
effort targeted to our prospective customers. We may be unable to hire, train or
retain the kind and number of sales and marketing personnel we will need for
this effort because competition for qualified sales and marketing personnel is
intense. In addition, if we resume operations we plan to rely increasingly on
advertising agencies and direct marketers to utilize the services we may offer.
If we do not effectively establish and manage our sales and marketing personnel,
our business could suffer.
We must renew and maintain relationships with our prior network of
independent product and service providers, such as Click Here to Find.Com, Golf
Illustrated, Inc. and Telemundo, who provided us with access to permission email
lists when we were operational. We entered into agreements with these
independent providers that were generally for an initial term of one to three
years, with an automatic annual renewal. Pursuant to these contracts, we
provided these providers with resale and tracking services by selling direct
marketers access to their lists, and they received a percentage of our revenue.
None of these agreements are currently in effect and we cannot assure you that
these agreements, if renewed, will generate revenues adequate to support our
operations. In addition to these independent providers, we had reseller
arrangements with third party list managers under which we paid a fixed fee for
the nonexclusive use of their lists for specific campaigns. These third party
list managers were not contractually obligated to provide us with access to
their lists. A majority of the email addresses that we had access to through our
proprietary list, our network of independent product and service providers and
our list managers was comprised of addresses from list managers. If we fail to
renew, maintain and thereafter increase our relationships with these independent
providers and third party list managers, our ability to successfully reestablish
our business could fail.
THE LOSS OF OUR CHIEF EXECUTIVE OFFICER WITHOUT AN ADEQUATE REPLACEMENT WOULD
REQUIRE US TO TERMINATE ALL OPERATIONS.
Dr. Michael Mitchell, our president and chief executive officer, is one
of only two remaining employees. If Dr. Mitchell leaves the Company or is
otherwise unable to act as our Chief Executive Officer, we will be required to
terminate all operations unless we are able to find an adequate replacement.
IF WE RESUME OUR BUSINESS, THERE ARE PRIVACY CONCERNS AND POTENTIAL RESTRICTIONS
WITH RESPECT TO OUR SERVICES THAT COULD NEGATIVELY AFFECT OUR BUSINESS.
If we resume our business, our technology will collect and utilize data
derived from user activity in the Golf Promo Network. Our network will enable
the use of personal profiles, in addition to other mechanisms, to deliver
targeted marketing materials, to help compile demographic information and to
limit the frequency with which an advertisement is shown to a user. The
effectiveness of our technology and the success of our business could be limited
by any reduction or limitation in the use of personal profiles. These personal
profiles contain bits of information keyed to a specific server, file pathway or
directory location that is stored in the user's hard drive. Personal profiles,
commonly referred to as cookies, are placed on the user's hard drive without the
user's knowledge or consent, but can be removed by the user at any time through
the modification of his browser settings. In addition, a user can configure
currently available applications to prevent personal profiles from being stored
on his hard drive. Some privacy advocates and governmental bodies have suggested
limiting or eliminating the use of personal profiles. In the event this were to
occur, our business, if resumed, would likely suffer.
IF WE RESUME OPERATIONS, GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES OF DOING
BUSINESS ON THE INTERNET COULD NEGATIVELY IMPACT OUR BUSINESS.
The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws, including those governing intellectual property,
privacy, libel and taxation, apply to the Internet and Internet advertising. In
addition, the growth and development of the market for Internet commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet. Our business, if resumed, could suffer with the
adoption or modification of laws or regulations relating to the Internet, or the
application of existing laws to the Internet.
IF WE RESUME OPERATIONS, WE MAY FACE CLAIMS FOR ACTIVITIES OF OUR CUSTOMERS
WHICH COULD HARM OUR BUSINESS.
If we resume our business, our customers' promotion of their products
and services may not comply with federal, state and local laws. A wide variety
of laws and regulations govern the content of advertisements and regulate the
sale of products and services. There is also uncertainty as to the application
of these laws to the emerging business of advertising on the Internet. We cannot
predict whether our role in facilitating these marketing activities would expose
us to liability under these laws. Accordingly, if we resume our operations, we
may face civil or criminal liability for unlawful advertising or other
activities of our customers. If we are exposed to this kind of liability, we
could be required to pay substantial fines or penalties, redesign our business
methods, discontinue some of our services or otherwise expend resources to avoid
liability. Any costs incurred as a result of this kind of liability or asserted
liability could harm our business.
[ARE THERE ANY ADDITIONAL RISK, SUCH AS LITIGATION INSTITUTED SINCE 7/8/02 OR
OTHER LOANS MADE OR DEFAULTS CALLED SINCE THAT TIME. PLEASE ADVISE.] BARRY TO
ADD!
ITEM 3 - Controls and Procedures
Our management, which is comprised of our Chief Executive Officer and
Chief Financial Officer, have conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, our Chairman of the Board and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to them in a timely fashion since they are our only employees
and we are inactive. There have been no significant changes in internal
controls, or in other factors that could significantly affect internal controls,
subsequent to the date our Chairman of the Board and Chief Financial Officer
completed their evaluation.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Change in Securities
None.
ITEM 3. Defaults Upon Senior Securities
See also Notes B through D to our unaudited consolidated financial
statements for the three month period ending August 31, 2002.
ITEM 4. Submission of Matters to a Vote of Securities Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Reports of Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LSC GOLF, INC.
By: /s/ MICHAEL MITCHELL
---------------------------------
Michael Mitchell
Chairman and Principal Executive
Officer
By: /s/ ALEX BRUNI
---------------------------------
Alex Bruni
Principal Accounting and
Financial Officer
Date: November 15, 2002
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of LCS Golf, Inc. (the "Registrant") on
Form 10-QSB for the quarterly period ending August 31, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Michael
Mitchell, Chairman of the Board of Directors, President, and Chief Executive
Officer of the Registrant, certify, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, that:
1. I have reviewed this quarterly report on Form 10-QSB of the Registrant;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 15, 2002
Michael Mitchell, Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of LCS Golf, Inc. (the "Registrant") on
Form 10-QSB for the quarterly period ending August 31, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Alex
Bruni, Chief Financial Officer of the Registrant, certify, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, that:
1. I have reviewed this quarterly report on Form 10-QSB of the Registrant;
2 Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 15, 2002
Alex Bruni, Chief Financial Officer